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Revisiting the hedonic price method in the presence of market segmentation

Author

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  • Marc Baudry

    () (EconomiX, University of Paris Ouest Nanterre la Défense
    Climate Economics Chair, Palais Brongniart)

  • Masha Maslianskaia-Pautrel

    (Granem, University of Angers)

Abstract

Abstract The article presents a theoretical analysis of the role of groupwise heterogeneity in the formation of hedonic prices. We show that in this case, submarkets emerge from market equilibrium. The existence of submarkets means that the hedonic price function is continuous, but the implicit price of characteristics is discontinuous at endogenous threshold values separating submarkets. Based on numerical simulations, the article highlights the way the groupwise heterogeneity could bias the estimation of the implicit price of environmental quality.

Suggested Citation

  • Marc Baudry & Masha Maslianskaia-Pautrel, 2016. "Revisiting the hedonic price method in the presence of market segmentation," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(4), pages 527-555, October.
  • Handle: RePEc:spr:envpol:v:18:y:2016:i:4:d:10.1007_s10018-015-0122-5
    DOI: 10.1007/s10018-015-0122-5
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    References listed on IDEAS

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